Insurers have welcomed Canberra’s move to set aside $50 million a year for flood levees, seawalls and other mitigation works aimed at improving natural disaster resilience.

The Insurance Council of Australia (ICA) calls the decision, contained in legislation that passed the Senate yesterday, “a leap in the right direction”.

The industry has been lobbying for at least $200 million a year to be spent on mitigation projects in the face of increasingly severe and costly natural disasters.

The $50 million will be drawn from the Emergency Response Fund, which was announced in the Morrison Government’s 2019/20 budget. The $4 billion fund could rise to $6.6 billion over the next decade, the Federal Government says.

Initially just $150 million – earmarked exclusively for post-disaster recovery – will be available from the fund. The extra $50 million for mitigation was agreed after the opposition Labor Party demanded it as a condition for its support of the fund legislation.

“Disbursements from the Emergency Response Fund will be available to be invested in efforts to support areas of the country affected by natural events including floods, bushfires and cyclones,” the office of Finance Minister Mathias Cormann says in a statement.

“Types of support available will include pre-disaster and emergency preparedness initiatives, additional recovery grants, economic aid packages and support to affected communities or industry sectors to help respond to and build resilience to natural disasters.”

Insurers have praised the additional funding, which is separate to the $130.5 million that the Morrison Government has budgeted for over five years to reduce the risk and impact of disasters.

“This is a timely decision, which comes at the start of disaster season,” ICA CEO Rob Whelan said yesterday. “Already, many communities have felt the effect of early-season bushfires, and the cyclone season is just around the corner.

“We are poised to assist the Commonwealth in developing mitigation action plans and identifying communities where investment in mitigation will have the most impact.

“The insurance industry is standing by to reduce insurance premiums wherever permanent and effective risk reduction is deployed. Premium reductions from previous mitigation efforts have been significant to many communities, and the best outcome is that these towns become more economically and socially sustainable for many generations.”

Suncorp and IAG – the country’s largest personal lines insurers – have both praised the move.

IAG MD Peter Harmer says his company looks forward “to working with [the Government and opposition] to identify opportunities to help make our communities safer and more resilient”.